Correcting unjustness in tax code

February 01, 2000

An excerpt from an editorial in Saturday's Chicago Tribune:

Elizabeth Cockrell and her husband were divorced after a three-year marriage that ended in 1982. By her account, she didn't know about the phony tax shelters into which her husband had put their money. But years later, the IRS showed up, demanding that she pay more than half a million dollars in back taxes, penalties and interest.

Thanks to outrages like this one, the law was overhauled in 1998. Congress voted to provide relief for "innocent spouses" victimized by spouses who bilked the tax collectors.

The change was a blessing to those (mostly women) who find out too late that they were unwitting parties to tax cheating. But, the New York Times recently reported, it has created problems for the IRS. The agency expected no more than 3,000 such cases each year, but has been swamped with 45,000 applications for innocent-spouse treatment. As a result, tax auditors have been shifted from inspecting individual and corporate tax returns to probing the details of failed marriages. The IRS has reassigned more than 3 percent of its auditors to these cases, one reason that the chance of having an individual return audited has dropped sharply.

Though this may be a burden, it's no reason to reconsider the law. The flood of cases should have surprised no one: Experts had said that as many as 75,000 women a year were forced to shoulder their husbands' or ex-husbands' tax load because they signed joint returns.

Of course, Congress may need to allocate more money to assure that the agency has enough auditors to handle both its old duties and this new one. Or the IRS may simply have to reorder its priorities and not scrutinize every minor innocent spouse claim to guard against being scammed. Auditors told the Times that the typical amount of tax owed in these cases is only $3,000 -- money that it may have little hope of collecting.

Redressing unfairness is often harder and more expensive than persisting in it. In this instance, the price of avoiding injustice is worth paying.